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Metso's Half-Year Review 2018

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Metso 2018 H1 Half-year Review.
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Metso's Half-Year Review 2018

  1. 1. Half-Year Review January 1 – June 302018
  2. 2. Metso’s Half-Year Review January 1 – June 30, 2018 All figures relating to 2017 have been restated to reflect the adoption of the IFRS 15 standard and the revision in the reporting of the Flow Control segment’s services business. The restated figures were published on April 16, 2018. Figures in brackets refer to the corresponding period in 2017, unless otherwise stated. Second-quarter 2018 in brief Half-year 2018 in brief Market outlook The outlook represents expected sequential market development with a rolling six-month view. Our market conditions are expected to develop as follows: • Growth in demand to increase for Minerals equipment • Growth in demand to remain stable for Minerals services • Growth in demand to level off for Flow Control Previous outlook (published April 25, 2018) Our market conditions are expected to develop as follows: • Growth in demand to remain stable for Minerals equipment and services • Growth in demand to remain stable for Flow Control equipment and services • Orders received increased 16%, or 23% in constant currencies, to EUR 1,712 million (1,482 million) • Services orders grew 8%, or 16% in constant currencies, to EUR 954 million (882 million) • Sales grew 13%, or 20% in constant currencies, and totaled EUR 1,490 million (1,322 million) • Services sales grew 10%, or 18% in constant currencies, and totaled EUR 864 million (786 million) • Adjusted EBITA was EUR 176 million, or 11.8% of sales (136 million, or 10.3%) • Operating profit (EBIT) up 40%, totaling EUR 167 million, or 11.2% of sales (119 million, or 9.0%) • Earnings per share were EUR 0.71 (0.47) • Free cash flow was EUR 23 million (43 million) • Healthy activity in all markets • Orders received increased 14%, or 22% in constant currencies, to EUR 853 million (749 million) • Services orders grew 7%, or 15% in constant currencies, to EUR 463 million (431 million) • Sales grew 15%, or 23% in constant currencies, and totaled EUR 776 million (675 million) • Services sales grew 10%, or 18% in constant currencies, and totaled EUR 442 million (403 million) • Adjusted EBITA was EUR 91 million, or 11.7% of sales (70 million, or 10.4%) • Operating profit (EBIT) up 45%, totaling EUR 86 million, or 11.1% of sales (60 million, or 8.9%) • Earnings per share were EUR 0.38 (0.24) • Free cash flow was EUR 21 million (4 million) 1 Metso's Half-Year Review January 1 - June 30, 2018
  3. 3. Interim President and CEO Eeva Sipilä: We saw continued healthy market activity across our businesses and were particularly pleased to see the project activity in the mining equipment market increase during the second quarter. The solid growth in both equipment and services is a clear indication of our strong position in our key markets. The recent increased uncertainty relating to global trade is something we are obviously watching closely. However, we currently estimate the direct impact of the tariffs enforced so far on Metso to be limited. Going forward, we will continue to focus on operational excellence as well as on implementing Metso’s other strategic fundamentals. We are moving forward with our Digital Strategy and currently successfully piloting comminution analytics at customer sites in North America, Africa, and Australia. We are also taking R&D plans forward across our portfolio to strengthen our offering further. Also, our work on adjacent acquisitions supporting our growth strategy continues. Overall, while we have a lot of areas of further improvement ahead of us, I am encouraged by the results we have achieved during the first six months of the year. Key figures EUR million Q2/2018 Q2/2017 Change % H1/2018 H1/2017 Change % 2017 Orders received 853 749 14 1,712 1,482 16 2,982 Orders received by the services business 463 431 7 954 882 8 1,717 % of orders received 54 58 56 60 58 Order backlog at the end of the period 1,601 1,411 13 1,439 Sales 776 675 15 1,490 1,322 13 2,699 Sales of the services business 442 403 10 864 786 10 1,595 % of sales 57 60 58 59 59 Earnings before interest, tax and amortization (EBITA), adjusted 91 70 30 176 136 29 244 % of sales 11.7 10.4 11.8 10.3 9.0 Operating profit (EBIT) 86 60 45 167 119 40 218 % of sales 11.1 8.9 11.2 9.0 8.1 Earnings per share, EUR 0.38 0.24 58 0.71 0.47 51 0.68 Free cash flow 21 4 425 23 43 -47 158 Return on capital employed (ROCE) before taxes, annualized, % 16.8 11.1 10.3 Equity-to-assets ratio at the end of the period, % 47.0 45.9 44.5 Net gearing at the end of the period, % 13.7 7.5 1.8 Personnel at the end of the period 12,708 11,788 8 12,037 Operating environment Healthy market activity continued in all our businesses during the second quarter. The market for mining equipment improved, which resulted in increased quotation activity, and aggregates equipment saw continued strong demand especially in India and North America. The demand for services was healthy from both mining and aggregates customers. In the valves business, project and day-to-day activity alike remained healthy. Good development continued also in the demand for pumps and recycling. 2 Metso's Half-Year Review January 1 - June 30, 2018
  4. 4. Orders and sales Second-quarter orders received increased 14%, or 22% in constant currencies, compared to the same quarter in 2017 and totaled EUR 853 million (EUR 749 million). Order growth was 17% in the Minerals segment and 6% in the Flow Control segment. Services orders grew 7% from comparison period to EUR 463 million. Services orders increased 7% in Minerals and 11% in Flow Control. Equipment orders increased 34% in Minerals and 3% in Flow Control. Quarterly sales totaled EUR 776 million (EUR 675 million) and increased 15%, or 23% in constant currencies, from the comparison period. Sales growth in both segments was mainly driven by equipment. Minerals’ sales grew 14% and totaled EUR 596 million, while Flow Control’s sales increased 18% to EUR 180 million. Orders in January-June totaled EUR 1,712 million, which is 16% higher than in the corresponding period of 2017. Orders grew 17% in Minerals to EUR 1,325 million and 12% in Flow Control to EUR 389 million. The order backlog at the end of June 2018 totaled EUR 1,601 million (EUR 1,439 million at the end of 2017). Approximately 80% of the order backlog is expected to be delivered in 2018. January-June sales totaled EUR 1,490 million, which is 13% higher than in the first half of 2017. Minerals’ sales increased 14% and Flow Control’s sales 10% year-on-year. Currency impact on orders received (compared to the same period in 2017) Q2/2018 change using reported rates, % Q2/2018 change using constant rates, % H1/2018 change using reported rates, % H1/2018 change using constant rates, % Minerals 17 25 17 25 Services business 7 15 8 16 Flow Control 6 12 12 19 Services business 11 18 8 15 Metso total 14 22 16 23 Services business 7 16 8 16 Currency impact on sales (compared to the same period in 2017) Q2/2018 change using reported rates, % Q2/2018 change using constant rates, % H1/2018 change using reported rates, % H1/2018 change using constant rates, % Minerals 14 22 14 21 Services business 10 18 10 18 Flow Control 18 26 10 17 Services business 13 18 7 14 Metso total 15 23 13 20 Services business 10 18 10 18 Financial performance Adjusted EBITA in the second quarter totaled EUR 91 million, or 11.7% of sales (EUR 70 million, or 10.4%). Sales growth had a positive impact on profitability, whereas sales mix had a negative impact. Minerals’ adjusted EBITA totaled EUR 64 million, or 10.7% of sales (EUR 55 million, or 10.5%). Flow Control’s adjusted EBITA totaled EUR 29 million, or 16.4% of sales (EUR 16 million, or 10.8%). Operating profit (EBIT) in the second quarter was EUR 86 million, or 11.1% of sales (EUR 60 million, or 8.9%). Minerals’ operating profit totaled EUR 62 million, or 10.4% of sales (EUR 47 million, or 9.1%). Flow Control’s operating profit totaled EUR 29 million, or 16.1% of sales (EUR 16 million, or 10.4%). In January-June 2018, adjusted EBITA totaled EUR 176 million, or 11.8% of sales (EUR 136 million, or 10.3%). Operating profit (EBIT) was EUR 167 million or 11.2% of sales (EUR 119 million, or 9.0%) 3 Metso's Half-Year Review January 1 - June 30, 2018
  5. 5. and profit before taxes EUR 152 million (EUR 103 million). Earnings per share were EUR 0.71 (EUR 0.47). Return on capital employed (ROCE) improved significantly and was 16.8% (10.3% at the end of 2017) due to both improved earnings and lower capital employed after a repayment of debt and dividend payment in the second quarter. The effective tax rate was 29.8%. Net financial expenses in January-June were EUR 15 million (EUR 16 million). Net cash generated by operating activities totaled EUR 34 million (EUR 54 million) and free cash flow was EUR 23 million (EUR 43 million). Cash flow was affected by a residual tax payment of EUR 21 million in the first quarter related to a reassessment decision from the Finnish tax authority. Metso is appealing the decision, but the payment was made to avoid any additional interest costs during the expected long complaint process. An increase in net working capital, arising mainly from a ramp-up in supply chain in response to higher demand, had a negative impact of EUR 95 million on cash flow (negative impact of EUR 56 million). Financial position Metso’s liquidity position remains strong. Total cash assets at the end of June were EUR 423 million (EUR 827 million at the end of 2017), of which EUR 88 million (EUR 154 million at the end of 2017) was invested in financial instruments with an initial maturity exceeding three months, and the remaining EUR 335 million (EUR 673 million at the end of 2017) is accounted for cash and cash equivalents. The decline in cash and cash equivalents resulted from a repayment of a USD-denominated loan with a nominal value of EUR 211 million and a private placement with a nominal value of EUR 37 million during the quarter. In addition, a dividend of EUR 157 million was paid on April 4, 2018. Metso has an undrawn, committed EUR 500 million revolving credit facility and an undrawn, committed EUR 40 million loan from the European Investment Bank. Metso’s balance sheet is solid. Net interest-bearing liabilities were EUR 177 million at the end of June (EUR 24 million at the end of 2017) and net gearing was 13.7% (1.8% at the end of 2017). The equity-to-assets ratio was 47.0% (44.5% at the end of 2017). Our credit rating remains unchanged: Standard & Poor’s Ratings Services confirmed Metso’s long-term corporate credit rating of BBB and short-term credit rating of A-2, with a stable outlook, in March 2018. Capital expenditure and investments Gross capital expenditure in January-June, excluding business acquisitions, was EUR 26 million (EUR 15 million). Maintenance accounted for 52%, or EUR 14 million (88%, or EUR 13 million). Growth investments relate mainly to increased aggregates equipment manufacturing capacity in Alwar, India, and Tampere, Finland, and foundry capacity in South Africa and China as well as rubber consumables manufacturing at multiple locations globally. Capital expenditure excluding acquisitions is expected to increase in 2018 compared to 2017. Research and development Research and development (R&D) expenses started to slowly build up in the second quarter and were EUR 16 million, or 1.1% of sales, for the first half of the year (EUR 13 million, or 1.0%). Expenditures related to the Digital Program are excluded from R&D expenses. Acquisitions Metso announced two acquisitions during the second quarter. On April 4, Metso announced an agreement to acquire the valve automation division of the India-based valve technology company Rotex Manufacturers and Engineers Pvt. Ltd. The company has a market- leading position in India in the actuator business and an advanced offering of switches, process valves, and valve automation products and solutions. The acquired division's sales in the last fiscal year ending 4 Metso's Half-Year Review January 1 - June 30, 2018
  6. 6. March 31, 2018, were approximately EUR 19 million and it employs around 275 people. The closing of the acquisition is expected to take place during the third quarter of 2018. On April 9, Metso announced an agreement to acquire the mobile crushing and screening plant provider P.J. Jonsson och Söner, based in Sweden. With the acquisition, Metso will strengthen the breadth and availability of its product and service offering for the aggregates industry in the Nordics. The company's sales in the fiscal year 2017 were EUR 33 million and it has 40 employees. The closing of the acquisition took place after the reporting period on July 2, 2018. Personnel Metso had 12,708 employees at the end of June, which is 671 more than at the end of December 2017. From the year end, personnel increased by 569 to 9,459 in Minerals and by 91 to 2,751 in Flow Control. Personnel in the Group Head Office and support functions totaled 498 (487 at the end of 2017). Personnel by area June 30, 2018 % of personnel June 30, 2017 % of personnel Change % Dec 31, 2017 Europe 4,388 34 4,206 36 4 4,113 North America 1,635 13 1,566 13 4 1,563 South and Central America 2,883 23 2,630 22 10 2,725 Asia-Pacific 2,933 23 2,509 21 17 2,795 Africa and Middle East 869 7 877 7 -1 841 Metso total 12,708 100 11,788 100 8 12,037 5 Metso's Half-Year Review January 1 - June 30, 2018
  7. 7. Reporting segments: Minerals EUR million Q2/2018 Q2/2017 Change % H1/2018 H1/2017 Change % 2017 Orders received 671 575 17 1,325 1,135 17 2,308 Orders received by the services business 395 370 7 817 756 8 1,474 % of orders received 59 64 62 67 64 Order backlog at the end of the period 1,292 1,140 13 1,173 Sales 596 523 14 1,149 1,012 14 2,064 Sales of the services business 380 347 10 743 673 10 1,368 % of sales 64 66 65 67 66 Earnings before interest, tax and amortization (EBITA), adjusted 64 55 17 127 98 29 168 % of sales 10.7 10.5 11.1 9.7 8.1 Operating profit (EBIT) 62 47 31 123 87 42 153 % of sales 10.4 9.1 10.7 8.6 7.4 Return on operative capital employed (ROCE), annualized, % 23.1 16.3 14.7 Personnel at the end of the period 9,459 8,567 10 8,890 Minerals’ orders received in the second quarter increased 17% year-on-year and totaled EUR 671 million (EUR 575 million). Orders grew in all businesses with the strongest growth in mining equipment. Second- quarter orders received by the services business accounted for EUR 395 million (EUR 370 million). Quarterly sales totaled EUR 596 million (EUR 523 million) and the increase of 14% was mainly due to growth in the equipment business. The aggregates business reported strong second-quarter growth for equipment orders, driven by North America and India. Mining equipment orders increased, driven by an order for one sizable pellet plant and an order for three grinding lines for an iron ore operation. Services orders increased, thanks to healthy market activity in the main mining markets. Improved activity in the metal recycling market increased both orders and sales of the Recycling business. Higher sales resulted in an adjusted EBITA totaling EUR 64 million (EUR 55 million), while the sales mix had a negative impact on the adjusted EBITA margin of 10.7% (10.5%). Operating profit (EBIT) improved significantly, since the comparison period included efficiency-related adjustment items, and totaled EUR 62 million, or 10.4% of sales (EUR 47 million, or 9.1%). Orders in January-June increased 17% from the comparison period and totaled EUR 1,325 million. Sales during the same period grew 14%, totaling EUR 1,149 million. Adjusted EBITA was EUR 127 million, or 11.1%, and operating profit EUR 123 million, or 10.7% Minerals: Sales and profitability Order growth of 17% was supported by an increase in mining orders Equipment was driving the sales growth of 14% Operating profit improved significantly year-on-year 10.5 10.6 10.5 9.7 9.9 9.8 8.2 8.1 8.8 8.8 0 2 4 6 8 10 12 14 0 500 1,000 1,500 2,000 2,500 3,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 %EUR million Services sales, rolling 12 months Equipment sales, mining, rolling 12 months Equipment sales, aggregates, rolling 12 months Adjusted EBITA %, rolling 12 months 6 Metso's Half-Year Review January 1 - June 30, 2018
  8. 8. Reporting segments: Flow Control EUR million Q2/2018 Q2/2017 Change % H1/2018 H1/2017 Change % 2017 Orders received 184 174 6 389 347 12 675 Orders received by the services business 68 61 11 136 126 8 243 % of orders received 37 35 35 36 36 Order backlog at the end of the period 312 271 15 267 Sales 180 152 18 341 310 10 635 Sales of the services business 62 55 13 121 113 7 228 % of sales 34 36 35 36 36 Earnings before interest, tax and amortization (EBITA), adjusted 29 16 80 55 41 33 93 % of sales 16.4 10.8 16.1 13.3 14.6 Operating profit (EBIT) 29 16 83 54 40 35 91 % of sales 16.1 10.4 15.8 12.9 14.3 Return on operative capital employed (ROCE), annualized, % 36.2 25.1 29.7 Personnel at the end of the period 2,751 2,685 2 2,660 Flow Control’s second-quarter orders received increased 6% to EUR 184 million (EUR 174 million). Pumps posted solid order growth and valve orders increased, thanks to continued healthy project activity in the pulp and paper market as well as good activity in the day-to-day business. However, as expected, valve orders did not reach the record level of the first quarter 2018. Sales increased 18% year-on-year to EUR 180 million (EUR 152 million), thanks to a good order backlog built up during the previous quarters. Good operational performance contributed to strong profitability in the quarter. Adjusted EBITA was EUR 30 million, or 16.4% of sales (EUR 16 million, or 10.8%) and operating profit EUR 29 million, or 16.1% of sales (EUR 16 million, or 10.4%). Orders in January-June increased 12% from the comparison period and totaled EUR 389 million (EUR 347 million). Growth came from both equipment and valve services. Sales totaling EUR 341 million in the first half grew 10% from the comparison period, driven by equipment business. Adjusted EBITA for the same period was EUR 55 million, or 16.1% of sales, and operating profit EUR 54 million, or 15.8% of sales. Flow Control: Sales and profitability Healthy order growth Strong sales and operating profit development 16.5 15.1 14.2 15.0 15.8 15.1 14.8 14.6 14.7 16.0 0 2 4 6 8 10 12 14 16 18 20 0 100 200 300 400 500 600 700 800 900 1,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 %EUR million Services sales, rolling 12 months Equipment sales, rolling 12 months Adjusted EBITA %, rolling 12 months 7 Metso's Half-Year Review January 1 - June 30, 2018
  9. 9. Decisions of the Annual General Meeting (AGM) The Annual General Meeting was held in Helsinki on March 22, 2018. The AGM approved the Financial Statements for 2017 and discharged the members of the Board of Directors and the President and CEOs from liability for the 2017 financial year. The Authorized Public Accountant firm Ernst & Young was elected as Metso’s Auditor with Mikko Järventausta as principal responsible auditor. The dividend of EUR 1.05 per share, approved by the AGM, was paid on April 4, 2018. In addition, the AGM approved the proposals of the Board of Directors to authorize the Board to decide on both the repurchase of Metso shares as well as the issuance of shares and special rights entitling to shares. The Nomination Board’s proposals concerning Board members and their remuneration were also approved. The minutes of the meeting are available at www.metso.com/agm. President and CEO On May 21, Metso's Board of Directors appointed Pekka Vauramo as President and CEO of Metso, effective as of November 2018 at the latest. He has served as President and CEO of Finnair since 2013, and prior to that held several management positions at Cargotec (2007-2013) and Sandvik (1985-2007). Eeva Sipilä, CFO, has served as Metso's interim President and CEO since February 3, 2018, and will continue in the role until Pekka Vauramo joins Metso. The previous President and CEO Nico Delvaux left his duties on February 2, 2018. Annual report Metso’s annual report for 2017 was published on February 23, 2018. The report entity includes the financial statements, annual review, corporate governance statement and externally assured sustainability supplement. It is available at www.metso.com/2017. Shares and share trading Metso’s share capital was EUR 140,982,843.80 and the number of shares 150,348,256 on June 30, 2018. This included 351,128 treasury shares held by the Parent Company, which represented 0.2% of all shares and votes. A total of 73,463,332 Metso shares were traded on Nasdaq Helsinki in January-June 2018, equivalent to a turnover of EUR 2,025 million. Metso’s market capitalization at the end of June, excluding shares held by the Parent Company, was EUR 4,305 million (EUR 4,270 million at the end of 2017). Metso share performance on Nasdaq Helsinki January 1- June 30, 2018 EUR Closing price 28.70 Highest share price 31.02 Lowest share price 23.79 Volume-weighted average trading price 27.55 In addition to Nasdaq Helsinki, Metso’s ADRs (American Depositary Receipts) are traded on the International OTCQX market in the United States under the ticker symbol ‘MXCYY’, with four ADRs representing one Metso share. The closing price of the Metso ADR on June 30, 2018, was USD 8.35. Flagging notifications In January-June 2018, Metso received one flagging notification relating to changes in the direct shareholding, shareholding through financial instruments or their total amount. Metso is not aware of any shareholders’ agreements regarding the ownership of Metso shares and voting rights. Date Shareholder Threshold Direct, % Indirect, % Total, % Total shares January 8 Blackrock, Inc. above 5% 5.02 0.76 5.79 8,706,776 8 Metso's Half-Year Review January 1 - June 30, 2018
  10. 10. Short-term business risks and market uncertainties Uncertainties in economic growth and political developments globally might affect our customer industries, reduce the investment appetite and spending among our customers, and thereby weaken the demand for Metso’s products and services as well as affect our business operations. There are also other market- and customer-related risks that may cause on-going projects to be postponed, delayed or discontinued. While the direct impact of the tariffs imposed between the US and China is estimated to be limited on Metso, the possible indirect impacts on economic growth and customer behavior are currently difficult to estimate. Continued market growth and inflation as well as the impact of tariffs or other trade barriers could pose challenges to our supply chain and price management with an impact on our growth capability and margins. Exchange rate fluctuations and changes in commodity prices could affect our orders received, sales and financial performance, although the wide scope of our operations limits the exposure to single currencies or commodities. Metso hedges currency exposure linked to firm delivery and purchase agreements. Uncertain market conditions might adversely affect our customers’ payment behavior and increase the risk of lawsuits, claims and disputes taken against Metso in various countries related to, among other things, Metso’s products, projects and other operations. Information security and cyber threats can potentially disturb or disrupt Metso’s businesses and operations. Market outlook The outlook represents expected sequential market development with a rolling six-month view. Our market conditions are expected to develop as follows: • Growth in demand to increase for Minerals equipment • Growth in demand to remain stable for Minerals services • Growth in demand to level off for Flow Control Previous market outlook (published April 25, 2018) Our market conditions are expected to develop as follows: • Growth in demand to remain stable for Minerals equipment and services • Growth in demand to remain stable for Flow Control equipment and services Helsinki, July 25, 2018 Metso Corporation’s Board of Directors 9 Metso's Half-Year Review January 1 - June 30, 2018
  11. 11. Half-Year Review, tables CONSOLIDATED STATEMENT OF INCOME EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 1-12/2017 Sales 776 675 1,490 1,322 2,699 Cost of goods sold -543 -488 -1,049 -951 -1,968 Gross profit 233 187 441 371 731 Selling, general and administrative expenses -134 -127 -263 -253 -510 Other operating income and expenses, net -13 0 -11 1 -2 Share in profits of associated companies 0 0 0 0 0 Operating profit 86 60 167 119 218 Financial income 4 2 5 3 12 Financial expenses -9 -9 -20 -19 -47 Financial expenses, net -5 -7 -15 -16 -35 Profit before taxes 81 53 152 103 184 Income taxes -24 -17 -45 -32 -82 Profit for the period 57 36 107 70 102 Attributable to: Shareholders of the parent company 57 36 107 70 102 Non-controlling interests 0 0 0 0 0 Profit for the period 57 36 107 70 102 Earnings per share Basic, EUR 0.38 0.24 0.71 0.47 0.68 Diluted, EUR 0.38 0.24 0.71 0.47 0.68 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 1-12/2017 Profit for the period 57 36 107 70 102 Items that may be reclassified to profit or loss in subsequent periods: Cash flow hedges, net of tax 0 2 0 3 3 Equity instruments at fair value, net of tax 0 0 0 0 0 Currency translation on subsidiary net investments -6 -32 -15 -26 -39 -6 -30 -15 -23 -36 Items that will not be reclassified to profit or loss: Defined benefit plan actuarial gains (+) / losses (-), net of tax 0 - 1 - 1 Other comprehensive income -6 -30 -14 -23 -35 Total comprehensive income 51 6 93 47 67 Attributable to: Shareholders of the parent company 51 6 93 47 67 Non-controlling interests 0 0 0 0 0 Total comprehensive income 51 6 93 47 67 10 Metso's Half-Year Review January 1 - June 30, 2018
  12. 12. CONSOLIDATED BALANCE SHEET ASSETS EUR million June 30, 18 June 30, 17 Dec 31, 17 Non-current assets Intangible assets Goodwill 466 449 466 Other intangible assets 72 76 79 538 525 545 Tangible assets Land and water areas 42 43 43 Buildings and structures 95 103 98 Machinery and equipment 129 138 136 Assets under construction 18 8 10 284 293 287 Other non-current assets Investments in associated companies 1 1 1 Non-current financial assets 7 3 5 Loan and other interest bearing receivables 3 3 3 Deferred tax asset 90 103 93 Other non-current assets 28 31 29 127 140 130 Total non-current assets 950 958 961 Current assets Inventories 857 721 750 Receivables Trade and other receivables 702 616 644 Receivables from customers under revenue contracts 82 65 66 Loan and other interest bearing receivables 1 1 0 Other current financial assets 88 119 154 Income tax receivables 36 29 38 910 829 903 Cash and cash equivalents 335 629 673 Total current assets 2,102 2,179 2,326 TOTAL ASSETS 3,052 3,138 3,287 11 Metso's Half-Year Review January 1 - June 30, 2018
  13. 13. SHAREHOLDERS' EQUITY AND LIABILITIES EUR million June 30, 18 June 30, 17 Dec 31, 17 Equity Share capital 141 141 141 Cumulative translation adjustments -102 -74 -87 Fair value and other reserves 304 302 302 Retained earnings 939 954 988 Equity attributable to shareholders 1,282 1,323 1,344 Non-controlling interests 7 7 7 Total equity 1,289 1,330 1,351 Liabilities Non-current liabilities Long-term debt 559 590 554 Post employment benefit obligations 70 85 68 Provisions 33 39 37 Non-current financial liabilities 4 2 2 Deferred tax liability 17 6 18 Total non-current liabilities 683 722 680 Current liabilities Current portion of long-term debt 29 243 279 Short-term debt 15 18 21 Trade and other payables 582 475 547 Provisions 72 66 74 Advances received 211 192 198 Liabilities to customers under revenue contracts 97 47 58 Other current financial liabilities 21 4 10 Income tax liabilities 53 40 70 Total current liabilities 1,080 1,085 1,257 Total liabilities 1,763 1,807 1,937 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 3,052 3,138 3,287 NET INTEREST BEARING LIABILITIES EUR million June 30, 18 June 30, 17 Dec 31, 17 Long-term interest bearing debt 588 833 833 Short-term interest bearing debt 15 18 21 Cash and cash equivalents -335 -629 -673 Other interest bearing assets -91 -123 -157 Net interest bearing liabilities 177 99 24 12 Metso's Half-Year Review January 1 - June 30, 2018
  14. 14. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 1-12/2017 Operating activities: Profit for the period 57 36 107 70 102 Adjustments: Depreciation and amortization 14 14 29 29 59 Financial expenses, net 5 7 15 16 35 Income taxes 24 17 45 32 82 Other items -1 7 0 12 16 Change in net working capital -51 -35 -95 -56 -23 Net cash flow from operating activities before financing items and taxes 48 46 100 103 270 Net financial expenses paid -7 -9 -9 -13 -21 Income taxes paid -19 -25 -57 -37 -64 Net cash flow from operating activities 23 12 34 54 185 Investing activities: Capital expenditures on intangible and tangible assets -14 -9 -26 -15 -38 Proceeds from sale of intangible and tangible assets 1 - 3 2 5 Business acquisitions, net of cash acquired - - - - -30 Other items - - - - -2 Net cash flow from investing activities -12 -9 -24 -13 -66 Financing activities: Dividends paid -157 -157 -157 -157 -157 Proceeds from (+) / investments in (-) financial assets 37 -8 65 0 -35 Proceeds from (+) / repayments of (-) debt, net -250 76 -255 56 59 Other items - -1 - -1 -1 Net cash flow from financing activities -370 -90 -347 -102 -134 Net change in cash and cash equivalents -360 -87 -337 -61 -15 Effect from changes in exchange rates 0 -9 -1 -7 -12 Cash and cash equivalents at beginning of period 694 725 673 698 698 Cash and cash equivalents at end of period 335 629 335 629 673 FREE CASH FLOW EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 1-12/2017 Net cash flow from operating activities 23 12 34 54 185 Maintenance investments -3 -8 -14 -13 -32 Proceeds from sale of intangible and tangible assets 1 - 3 2 5 Free cash flow 21 4 23 43 158 13 Metso's Half-Year Review January 1 - June 30, 2018
  15. 15. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY EUR million Share capital Cumulative translation adjustments Fair value and other reserves Retained earnings Equity attributable to shareholders Non- controlling interests Total equity Jan 1, 2017 141 -48 299 1,039 1,431 8 1,439 Profit for the period - - - 70 70 0 70 Other comprehensive income Cash flow hedges, net of tax - - 3 - 3 - 3 Equity instruments at fair value, net of tax - - 0 - 0 - 0 Currency translation on subsidiary net investments - -26 - - -26 - -26 Defined benefit plan actuarial gains (+) / losses (-), net of tax - - - - 0 - 0 Total comprehensive income - -26 3 70 47 0 47 Dividends - - - -157 -157 0 -157 Donations to universities - - - -1 -1 - -1 Share-based payments, net of tax - - 0 0 0 - 0 Other items - - 0 3 3 0 3 Changes in non-controlling interests - - - 0 0 0 0 June 30, 2017 141 -74 302 954 1,323 7 1,330 Dec 31, 2017 141 -87 302 988 1,344 7 1,351 Effect from adoption of new IFRS standards 1) - - 3 0 2 0 2 Jan 1, 2018 141 -87 305 987 1,346 7 1,353 Profit for the period - - - 107 107 0 107 Other comprehensive income Cash flow hedges, net of tax - - - - 0 - 0 Equity instruments at fair value, net of tax - - 0 - 0 - 0 Currency translation on subsidiary net investments - -15 - - -15 0 -15 Defined benefit plan actuarial gains (+) / losses (-), net of tax - - - 1 1 - 1 Total comprehensive income - -15 0 108 93 0 93 Dividends - - - -157 -157 0 -157 Share-based payments, net of tax - - -1 - -1 - -1 Other items - - 0 1 1 0 1 Changes in non-controlling interests - - - - - - - June 30, 2018 141 -102 304 939 1,282 7 1,289 1) IFRS 9 effect on retained earnings was EUR 491 thousand negative and IFRS 2 amendment effect on fair value reserve was EUR 2,594 thousand positive. 14 Metso's Half-Year Review January 1 - June 30, 2018
  16. 16. Notes to the Half-Year Review Contents 1. Basis of preparation 2. New accounting standards 3. Key figures and formulas 4. Disaggregation of sales 5. Fair value estimation 6. Notional amounts of derivative instruments 7. Contingent liabilities and other commitments 8. Acquisitions 9. Segment information 10. Quarterly information 11. Exchange rates 12. Events after the reporting period 1. BASIS OF PREPARATION This Half-Year Review has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’, applying the accounting policies of the Financial Statements 2017. In addition, new accounting standards have been adopted from the beginning of 2018 as described in section 2 of this Half-Year Review. This Half-Year Review is unaudited. All figures presented have been rounded and consequently the sum of individual figures might differ from the presented total figure. Reporting segments Metso Group is a global supplier of sustainable technology and services for mining, aggregates, oil and gas, pulp, paper and other process industries. Metso reports its results consistently with the strategy and reporting structure, which consists of two segments: Minerals and Flow Control. The Minerals segment supplies technology, process solutions, machinery and services for aggregates production, mining, minerals processing and recycling. The Minerals segment is organized in five business areas: Minerals Equipment, Aggregates Equipment, Minerals Services, Minerals Consumables and Recycling. The Flow Control segment supplies process industry flow control solutions and services. Flow Control customers operate in oil and gas, pulp and paper and other process industries. The segment is organized in two business areas: Valves and Pumps. The Group Head Office and other is comprised of the Parent Company with centralized group functions such as treasury and tax as well as shared service centers and holding companies. Metso is measuring the performance of segments with operating profit/ loss (EBIT). In addition, Metso uses alternative performance measures to reflect the underlying business performance and to improve comparability between financial periods: “earnings before interest, tax and amortization (EBITA), adjusted” and “return on operative capital employed for reporting segments (segment ROCE)”. Alternative performance measures should, however, not be considered as a substitute for measures of performance in accordance with the IFRS. 15 Metso's Half-Year Review January 1 - June 30, 2018
  17. 17. 2. NEW ACCOUNTING STANDARDS NEW AND AMENDED STANDARDS ADOPTED 2018 IFRS 15 Metso has adopted the new IFRS 15 Revenue from Contracts with Customers standard from January 1, 2018. Adoption was done fully retrospectively using permitted practical expedients. IFRS 15 introduces a five-step model for assessing revenue recognition. The principle is that revenue is recognized at an amount that reflects the consideration to which an entity expects to receive in exchange for transferring goods or services to a customer. The revenue is recognized when the control of goods or service is transferred to a customer. Revenue will be recognized either at a point in time or over time. Adoption of the new standard has had no impact on timing of revenue recognition or on balance sheet presentation. Reported sales will be reduced by the amounts of late delivery penalties, which have up until now been expensed. Accordingly, cost of goods sold (COGS) will be affected positively with the same amount. Gross profit and other income statement items as well as balance sheet will be unchanged. The used practical expedients: • client contracts signed and satisfied in 2017 were not adjusted • client contracts fully satisfied by January 1, 2017 were not adjusted • disclosure on transaction price allocated to unsatisfied performance obligations as at December 31, 2017 and the expected recognition period will not be reported The IFRS 15 impact on Metso’s Consolidated Statement of Income for 2017 is as follows: Metso Restated Adjustment Reported EUR million 1-12/2017 1-12/2017 Sales 2,699 -8 2,706 Cost of goods sold -1,968 8 -1,976 Gross profit 731 0 731 Restated financial information for 2017 reflecting the impact of the IFRS 15 transition on quarterly figures and segment information was published on April 16, 2018. Revenue recognition principles 2018 Metso’s Minerals segment provides standardized equipment deliveries and services consisting of wear or spare parts as well as customized large scale engineered system and/or equipment deliveries. Metso’s Flow Control segment provides process industry flow control solutions delivering pumps and valves and related services. Engineered system deliveries With customized large scale engineered system and/or equipment deliveries, where customer receives simultaneously the benefits provided and Metso has the right to payment for the performance completed, revenue will be recognized over time. Metso will continue to measure progress using the cost-to-cost method. In these contracts Metso typically requires advance payments from customers. These advance payments do not include a financing component, because the payment schedule of advances follows (closely) the timing of performance obligations to be satisfied. Delivery of standardized equipment, pumps and valves When Metso provides standardized equipment, equipment and wear or spare parts to customer, revenue will be recognized when control for the goods is transferred, typically at the delivery of the goods or after commissioning. 16 Metso's Half-Year Review January 1 - June 30, 2018
  18. 18. Service agreements A long-term service agreement is either a separate one or combined with an equipment delivery agreement. Metso's service commitments are mainly treated as separate performance obligations, and they will be recognized when the services are delivered over time. Short-term service agreements will be recognized at the point in time or by invoicing criteria. Some minor adjustments to the timing of the long-term service contracts might occur, due to the diversity of the performance obligations in the contracts. Variable components affecting to revenue recognitions Typical variable components in Metso’s agreements are late delivery penalties, rebates, possible extended warranties or right to return clauses. These elements might in the future reduce the amount to be recognized as revenue or postpone the recognition. Except for the late delivery penalties, the impact of these variable elements has not been significant in the current contract portfolio and in the comparative period. IFRS 9 Metso has adopted IFRS 9 Financial instruments standard from January 1, 2018. In Metso, IFRS 9 adoption is related to three areas: new requirements for the classification and measurement of financial assets, the impairment model for financial assets based on expected loss method, and to a new guidance on hedge accounting which will align more closely with common risk management practices. Applying IFRS 9 did not have any significant impact on the classification or valuation of financial assets, impairment bookings on trade receivables and other financial assets or hedge accounting. However, the adoption of IFRS 9 caused an adjustment to the carrying value of a debt instrument, for which the earlier modification loss has not been recognized. The adjustment in the opening retained earnings as at January 1, 2018, amounted to EUR 0.5 million. IFRS 2 Metso has adopted the amendment to IFRS 2 Classification and measurement of Share-based Payment Transactions from January 1, 2018. The amendment clarifies the measurement and accounting treatment for cash- settled share-based payments. When an employer is committed to the net settlement feature so, that it withholds and pays to the tax authority an amount for the employee’s tax obligation associated with a share-based payment, the whole award should be treated as if it would be equity-settled. The adoption of IFRS 2 amendment caused EUR 2.6 million adjustment increasing the fair value and other reserves in equity and releasing current liabilities as at January 1, 2018. NEW STANDARDS TO BE APPLIED IFRS 16 IFRS 16 Leases standard, replacing IAS 17, will be effective from January 1, 2019 onwards. Metso expects to adopt the standard from the same date onwards by applying the simplified retrospective method whereby the effect of initially applying IFRS 16 will be recognized to the assets and liabilities without restating the comparative information. Metso is currently assessing the full impact of IFRS 16, and has already earlier estimated that the adoption will have some impact on reported EBITDA, operating profit, non-current assets, interest-bearing liabilities and total balance sheet values as well as on related key figures. The change will also affect the presentation of cash flows from operating activities and from financing activities. As of June 30, 2018, Metso’s operating lease commitments amounted to EUR 130 million. 17 Metso's Half-Year Review January 1 - June 30, 2018
  19. 19. 3.1 KEY FIGURES 1-6/2018 1-6/2017 1-12/2017 Earnings per share, EUR 0.71 0.47 0.68 Diluted earnings per share, EUR 0.71 0.47 0.68 Equity/share at end of the period, EUR 8.55 8.82 8.96 Return on equity (ROE), %, (annualized) 16.2 10.2 7.3 Return on capital employed (ROCE) before taxes, %, (annualized) 16.8 11.1 10.3 Return on capital employed (ROCE) after taxes, %, (annualized) 12.3 8.1 6.6 Equity to assets ratio at end of the period, % 47.0 45.9 44.5 Net gearing at end of the period, % 13.7 7.5 1.8 Free cash flow, EUR million 23 43 158 Free cash flow/share, EUR 0.15 0.29 1.05 Cash conversion, % 21 61 155 Gross capital expenditure (excl. business acquisitions), EUR million 26 15 38 Business acquisitions, net of cash acquired, EUR million - - 30 Depreciation and amortization, EUR million 29 29 59 Number of outstanding shares at end of the period (thousands) 149,997 149,997 149,997 Average number of shares (thousands) 149,997 149,993 149,995 Average number of diluted shares (thousands) 150,136 150,190 150,151 18 Metso's Half-Year Review January 1 - June 30, 2018
  20. 20. 3.2 FORMULAS FOR KEY FIGURES Earnings before financial expenses, net, taxes and amortization (EBITA), adjusted = Operating profit + adjustment items + amortization Earnings per share, basic = Profit attributable to shareholders Average number of outstanding shares during the period Earnings per share, diluted = Profit attributable to shareholders Average number of diluted shares during the period Equity/share = Equity attributable to shareholders Number of outstanding shares at the end of the period Return on equity (ROE), % = Profit for the period x 100 Total equity (average for the period) Return on capital employed (ROCE) before taxes, % = Profit before tax + interest and other financial expenses x 100 Capital employed (average for the period) Return on capital employed (ROCE) after taxes, % = Profit for the period + interest and other financial expenses x 100 Capital employed (average for the period) Net gearing, % = Net interest bearing liabilities x 100 Total equity Equity to assets ratio, % = Total equity x 100 Balance sheet total - advances received Free cash flow = Net cash provided by operating activities - capital expenditures on maintenance investments + proceeds from sale on intangible and tangible assets Free cash flow/share = Free cash flow Average number of outstanding shares during the period Cash conversion, % = Free cash flow x 100 Profit for the period Interest bearing liabilities = Long term debt + current portion of long term debt + short term debt Net interest bearing liabilities = Interest bearing liabilities - loan and other interest bearing receivables (non-current and current) - interest bearing financial assets - cash and cash equivalents Net working capital (NWC) = Inventory + trade receivables + receivables from customers under revenue contracts + other non-interest bearing receivables - trade payables - liabilities to customers under revenue contracts - advances received - other non-interest bearing liabilities Capital employed = Net working capital + intangible and tangible assets + non-current investments + interest bearing receivables + financial assets + cash and cash equivalents + tax receivables, net + interest receivables, net Operative capital employed = Intangible and tangible assets + investments in associated companies and joint ventures + inventories + non-interest bearing operative assets and receivables (external) - non-interest bearing operating liabilities (external) Return on operative capital employed (ROCE) for reporting segments, % = Operating profit x 100 Operative capital employed (month-end average) 19 Metso's Half-Year Review January 1 - June 30, 2018
  21. 21. 4. DISAGGREGATION OF SALES Sales by segments EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 1-12/2017 Minerals 596 523 1,149 1,012 2,064 Flow Control 180 152 341 310 635 Group Head Office and other - 0 - 0 - Intra Metso sales 0 0 0 0 0 Sales 776 675 1,490 1,322 2,699 Sales by category EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 1-12/2017 Sales of services, total 442 403 864 786 1,595 Minerals 380 347 743 673 1,368 Flow Control 62 55 121 113 228 Sales of projects, equipment and goods, total 334 272 626 536 1,103 Minerals 215 176 406 339 696 Flow Control 119 97 220 197 407 Sales 776 675 1,490 1,322 2,699 Sales by geographical area EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 1-12/2017 Finland 21 22 44 39 85 Other European countries 186 143 348 278 596 North America 162 155 299 295 553 South and Central America 134 121 281 258 536 Asia-Pacific 202 164 385 318 670 Africa and Middle East 71 69 133 134 258 Sales 776 675 1,490 1,322 2,699 Timing of revenue recognition EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 1-12/2017 At a point in time, total 721 619 1,390 1,203 2,489 Minerals 541 467 1,049 893 1,855 Flow Control 180 152 340 310 635 Over time, total 55 56 100 119 209 Minerals 55 56 100 119 209 Flow Control 0 - 1 0 - Sales 776 675 1,490 1,322 2,699 20 Metso's Half-Year Review January 1 - June 30, 2018
  22. 22. 5. FAIR VALUE ESTIMATION For  those  financial  assets  and  liabilities  which  have  been  recognized  at  fair  value  in  the  balance  sheet,  the  following  measurement hierarchy and valuation methods have been applied:  Level 1  Quoted  unadjusted  prices  at  the  balance  sheet  date  in  active markets.  The market  prices  are  readily  and  regularly available from an exchange, dealer, broker, market information service system, pricing service or  regulatory agency. The quoted market price used for financial assets is the current bid price. Level 1 financial  instruments  include  debt  and  equity  investments  classified  as  financial  instruments  at  fair  value  through  profit and loss.     Level 2  The fair value of financial instruments in Level 2 is determined using valuation techniques. These techniques  utilize  observable  market  data  readily  and  regularly  available  from  an  exchange,  dealer,  broker,  market  information service system, pricing service or regulatory agency. Level 2 financial instruments include  • Over‐the‐counter derivatives classified as financial assets/liabilities at fair value through profit and loss or qualified for hedge accounting. • Debt securities classified as financial instruments at fair value through profit and loss  • Fixed rate debt under fair value hedge accounting.  Level 3  A  financial  instrument  is  categorized  into  Level  3,  if  the  calculation  of  the  fair  value  cannot  be  based  on  observable market data. Metso had no such instruments.  The table below presents Metso’s financial assets and liabilities that are measured at fair value. There has been no  transfers between fair value levels during 2018 or 2017.  June 30, 2018  EUR million  Level 1 Level 2  Level 3 Assets  Financial assets at fair value through profit and loss  Derivatives  ‐ 8   ‐ Securities  ‐ 88   ‐ Derivatives qualified for hedge accounting   ‐ 8   ‐ Total assets  ‐ 104  ‐ Liabilities  Financial liabilities at fair value through profit and loss  Derivatives  ‐ 14  ‐ Long term debt at fair value  ‐ 188  ‐ Derivatives qualified for hedge accounting  ‐ 9  ‐ Total liabilities  ‐ 211  ‐ June 30, 2017  EUR million  Level 1 Level 2  Level 3 Assets  Financial assets at fair value through profit and loss  Derivatives   ‐ 13   ‐ Securities  2 117   ‐ Derivatives qualified for hedge accounting   ‐ 8   ‐ Total assets  2 138  ‐ Liabilities  Financial liabilities at fair value through profit and loss  Derivatives  ‐ 4  ‐ Long term debt at fair value  ‐ 399  ‐ Derivatives qualified for hedge accounting  ‐ 4  ‐ Total liabilities  ‐ 407  ‐ Carrying value of other financial assets and liabilities than those presented in this fair value level hierarchy table approximates their fair value. Fair values  of other debt is calculated as net present values. 
  23. 23. 6. NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS EUR million June 30, 18 June 30, 17 Dec 31, 17 Forward exchange rate contracts 1,212 961 1,347 Interest rate swaps 345 345 432 Cross currency swaps 33 244 244 The notional amount of electricity forwards was 7 GWh as of June 30, 2018 and 25 GWh as of June 30, 2017. The notional amount of nickel forwards to hedge stainless steel prices was 282 tons as of June 30, 2018 and 264 tons as of June 30, 2017. The notional amounts indicate the volumes in the use of derivatives, but do not indicate the exposure to risk. 7. CONTINGENT LIABILITIES AND OTHER COMMITMENTS EUR million June 30, 18 June 30, 17 Dec 31, 17 Metso Group On behalf of others External guarantees given by parent and group companies 288 251 274 Other commitments Repurchase commitments 2 2 3 Other contingencies 6 3 3 Lease commitments 130 134 126 8. ACQUISITIONS Acquisitions in 2018 During the reporting period January 1 – June 30, 2018 Metso made no acquisitions. Acquisitions in 2017 On November 1, 2017, Metso acquired 100% of the share capital of Australian WearX Holding Pty Ltd, which is wear lining solutions provider. The acquisition strengthens Metso’s position in mining services in Australian markets. The business was consolidated into the Minerals segment. Purchase price paid amounted to EUR 31 million, the Identifiable net assets EUR 12 million and generated goodwill EUR 19 million. The acquired business contributed sales of EUR 4.7 million to the Metso Group for the period from November 1, 2017, to December 31, 2017, and the number of personnel was 142. The company’s sales in the twelve months fiscal year 2017 that ended June 30, amounted to EUR 23 million. 22 Metso's Half-Year Review January 1 - June 30, 2018
  24. 24. 9. SEGMENT INFORMATION On April 16, 2018, Metso published restated financial information for 2017 concerning IFRS 15 adoption and change in the definition of FFlow Control's ontrolFlow Control's Services business. Here presented figures are restated. ORDERS RECEIVED EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 7/2017- 6/2018 1-12/2017 Minerals 671 575 1,325 1,135 2,498 2,308 Flow Control 184 174 389 347 717 675 Intra Metso orders received -2 0 -3 0 0 0 Metso total 853 749 1,712 1,482 3,213 2,982 SALES EUR million 4-6/2018 4-6/2017 1-6/2018 1-6/2017 7/2017- 6/2018 1-12/2017 Minerals 596 523 1,149 1,012 2,202 2,064 Flow Control 180 152 341 311 666 635 Intra Metso sales 0 0 0 0 0 0 Metso total 776 675 1,490 1,322 2,868 2,699 ADJUSTED EBITA AND OPERATING PROFIT EUR million Minerals 4-6/2018 4-6/2017 1-6/2018 1-6/2017 7/2017- 6/2018 1-12/2017 Adjusted EBITA 64.0 54.9 127.0 98.3 196.5 167.8 % of sales 10.7 10.5 11.1 9.7 8.9 8.1 Capacity adjustment expenses - -6.0 - -8.7 -0.5 -8.1 Amortization of intangible assets -2.0 -1.4 -3.9 -2.9 -7.4 -6.3 Operating profit (EBIT) 62.0 47.4 123.1 86.7 189.8 153.4 % of sales 10.4 9.1 10.7 8.6 8.6 7.4 Flow Control 4-6/2018 4-6/2017 1-6/2018 1-6/2017 7/2017- 6/2018 1-12/2017 Adjusted EBITA 29.5 16.4 54.9 41.2 106.8 93.1 % of sales 16.4 10.8 16.1 13.2 16.0 14.6 Amortization of intangible assets -0.5 -0.6 -1.1 -1.2 -2.3 -2.4 Operating profit (EBIT) 28.9 15.8 53.8 40.0 104.5 90.8 % of sales 16.1 10.4 15.8 12.9 15.7 14.3 Group Head Office and other 4-6/2018 4-6/2017 1-6/2018 1-6/2017 7/2017- 6/2018 1-12/2017 Adjusted EBITA -2.5 -1.3 -5.9 -3.1 -20.1 -17.3 Amortization of intangible assets -2.0 -2.2 -4.0 -4.4 -8.1 -8.5 Operating profit (EBIT) -4.5 -3.4 -9.9 -7.4 -28.2 -25.7 Metso total 4-6/2018 4-6/2017 1-6/2018 1-6/2017 7/2017- 6/2018 1-12/2017 Adjusted EBITA 91.0 70.0 175.9 136.5 283.2 243.6 % of sales 11.7 10.4 11.8 10.3 9.9 9.0 Capacity adjustment expenses - -6.0 - -8.7 -0.5 -8.1 Amortization of intangible assets -4.5 -4.2 -9.0 -8.5 -17.7 -17.2 Operating profit (EBIT) 86.5 59.8 167.0 119.2 266.2 218.5 % of sales 11.1 8.9 11.2 9.0 9.3 8.1 OPERATIVE CAPITAL EMPLOYED AND SEGMENT ROCE-% EUR million, % 4-6/2018 4-6/2017 1-12/2017 Minerals 1,127 1,032 1,050 Segment ROCE-%, annualized 23.2 17.8 14.7 Flow Control 304 311 290 Segment ROCE-%, annualized 39.0 19.9 29.7 23 Metso's Half-Year Review January 1 - June 30, 2018
  25. 25. 10. QUARTERLY INFORMATION ORDERS RECEIVED EUR million 4-6/2018 1-3/2018 10-12/2017 7-9/2017 4-6/2017 Minerals 671 654 527 646 575 Flow Control 184 205 157 171 174 Group Head Office and other 0 0 0 0 0 Intra Metso orders received -2 0 0 0 0 Metso total 853 859 684 817 749 SALES EUR million 4-6/2018 1-3/2018 10-12/2017 7-9/2017 4-6/2017 Minerals 596 553 540 513 523 Flow Control 180 161 170 155 152 Group Head Office and other 0 0 0 0 0 Intra Metso sales -0 0 0 0 0 Metso total 776 714 710 668 675 ADJUSTED EBITA EUR million 4-6/2018 1-3/2018 10-12/2017 7-9/2017 4-6/2017 Minerals 64.0 63.0 48.2 21.3 54.9 Flow Control 29.5 25.4 26.6 25.3 16.4 Group Head Office and other -2.5 -3.5 -10.5 -3.6 -1.3 Metso total 91.0 84.9 64.3 43.0 70.0 ADJUSTED EBITA, % OF SALES % 4-6/2018 1-3/2018 10-12/2017 7-9/2017 4-6/2017 Minerals 10.7 11.4 8.9 4.2 10.5 Flow Control 16.4 15.8 15.6 16.3 10.8 Group Head Office and other n/a n/a n/a n/a n/a Metso total 11.7 11.9 9.1 6.4 10.4 ADJUSTMENT ITEMS EUR million 4-6/2018 1-3/2018 10-12/2017 7-9/2017 4-6/2017 Minerals - - 0.1 0.5 -6.0 Flow Control - - - - - Group Head Office and other - - - - - Metso total - - 0.1 0.5 -6.0 AMORTIZATION EUR million 4-6/2018 1-3/2018 10-12/2017 7-9/2017 4-6/2017 Minerals -2.0 -1.9 -2.0 -1.5 -1.4 Flow Control -0.5 -0.6 -0.6 -0.6 -0.6 Group Head Office and other -2.0 -2.0 -2.0 -2.1 -2.2 Metso total -4.5 -4.5 -4.6 -4.1 -4.2 24 Metso's Half-Year Review January 1 - June 30, 2018
  26. 26. OPERATING PROFIT (LOSS) EUR million 4-6/2018 1-3/2018 10-12/2017 7-9/2017 4-6/2017 Minerals 62.0 61.1 46.4 20.3 47.4 Flow Control 28.9 24.8 26.0 24.8 15.8 Group Head Office and other -4.5 -5.4 -12.6 -5.7 -3.4 Metso total 86.5 80.5 59.8 39.4 59.8 OPERATING PROFIT (LOSS), % OF SALES % 4-6/2018 1-3/2018 10-12/2017 7-9/2017 4-6/2017 Minerals 10.4 11.0 8.6 4.0 9.1 Flow Control 16.1 15.4 15.3 16.0 10.4 Group Head Office and other n/a n/a n/a n/a n/a Metso total 11.1 11.3 8.4 5.9 8.9 CAPITAL EMPLOYED EUR million June 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 June 30, 2017 Minerals * 1,127 1,077 1,051 1,018 1,032 Flow Control * 304 298 290 295 311 Group Head Office and other 462 717 863 881 838 Metso total 1,892 2,092 2,204 2,194 2,181 * Operative capital employed includes only external balance sheet items. ORDER BACKLOG EUR million June 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 June 30, 2017 Minerals 1,292 1,248 1,173 1,212 1,140 Flow Control 312 306 267 279 271 Group Head Office and other - - - - - Intra Metso order backlog -3 0 0 0 0 Metso total 1,601 1,553 1,439 1,491 1,411 PERSONNEL June 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 June 30, 2017 Minerals 9,459 9,313 8,890 8,607 8,567 Flow Control 2,751 2,575 2,660 2,584 2,685 Group Head Office and other 498 468 487 507 536 Metso total 12,708 12,356 12,037 11,698 11,788 25 Metso's Half-Year Review January 1 - June 30, 2018
  27. 27. 11. EXCHANGE RATES 1-6/2018 1-6/2017 1-12/2017 June 30,2018 June 30, 2017 Dec 31, 2017 USD (US dollar) 1.2060 1.0878 1.1307 1.1658 1.1412 1.1993 SEK (Swedish krona) 10.1722 9.5900 9.6392 10.4530 9.6398 9.8438 GBP (Pound sterling) 0.8811 0.8605 0.8742 0.8861 0.8793 0.8872 CAD (Canadian dollar) 1.5408 1.4471 1.4684 1.5442 1.4785 1.5039 BRL (Brazilian real) 4.1441 3.4750 3.6271 4.4876 3.7600 3.9729 CNY (Chinese yuan) 7.7119 7.4685 7.6299 7.7170 7.7385 7.8044 AUD (Australian dollar) 1.5656 1.4445 1.4780 1.5787 1.4851 1.5346 12. EVENTS AFTER THE REPORTING PERIOD On July 2, 2018, Metso completed the acquisition of the Swedish mobile crushing and screening solution provider P.J. Jonsson och Söner AB. The acquired business will be consolidated into Aggregate Equipment business area of Minerals segment from the beginning of July. The company's sales in the fiscal year 2017 were EUR 33 million and it has 40 employees. The parties have agreed not to disclose the acquisition price. It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding expectations for general economic development and the market situation, expectations for customer industry profitability and investment willingness, expectations for company growth, development and profitability and the realization of synergy benefits and cost savings, and statements preceded by “expects”, “estimates”, “forecasts” or similar expressions, are forward-looking statements. These statements are based on current decisions and plans and currently known factors. They involve risks and uncertainties that may cause the actual results to materially differ from the results currently expected by the company. Such factors include, but are not limited to: (1) general economic conditions, including fluctuations in exchange rates and interest levels which influence the operating environment and profitability of customers and thereby the orders received by the company and their margins, (2) the competitive situation, especially significant technological solutions developed by competitors, (3) the company’s own operating conditions, such as the success of production, product development and project management and their continuous development and improvement, (4) the success of pending and future acquisitions and restructuring. 26 Metso's Half-Year Review January 1 - June 30, 2018
  28. 28. Metso’s financial information in 2018 Financial Statements Review for 2017 on February 2 Annual Report 2017 on February 23 Interim Review for January – March 2018 on April 25 Half-Year Financial Review for 2018 on July 26 Interim Review for January – September 2018 on October 26 Metso Corporation, Group Head Office, Töölönlahdenkatu 2, PO Box 1220, FIN-00101 Helsinki, Finland Tel. +358 20 484 100 Fax +358 20 484 101 www.metso.com

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